Apple/Google: Japan’s regulators focus on high app store fees

The app store policies of Apple and Google may be violating Japanese antitrust law, says the Japan Fair Trade Commission. Heightened scrutiny of the two US tech giants sets the stage for further regulation and lower fees.

The two hold a duopoly in mobile operating systems in Japan. The market share held by Apple’s iOS and Google’s Android is 47 per cent and 53 per cent respectively. There is little competition in the app store market too.

Fees have long been a point of contention for regulators and developers. Local regulators say app store commission rates that run as high as 30 per cent could constitute abuse of a dominant position under Japanese antitrust law. Google settled a legal fight with US app developers over the money they earned creating apps for Android last year.

It is significant that the latest scrutiny is under way in Japan. On top of globally popular gaming apps, Japan’s massive anime and comics market has made its consumers the world’s highest spenders per capita on mobile apps. Annual revenues of nearly $20bn are growing at a rapid pace.

Japan’s regulators are showing signs of taking a more aggressive stance on antitrust issues. Power utilities were hit with record antitrust fines in December, pushing some into the red.

Companies that top the list of Japan’s app downloads can only gain from the added scrutiny. Shares of Kakao, parent of top comics app Piccoma, and Z Holdings, which owns messaging app Line, are down more than a quarter in the past year. GungHo Online, maker of the popular Puzzle & Dragons game, is down a tenth. Any cut in fees would boost app makers’ profits due to the sheer scale of downloads and in-app purchases made by more than 100mn subscribers in Japan.

Google has already cut its fees twice in recent years, with most of its developers charged rates of 15 per cent or less. Further cuts and changes to payment methods would set a precedent for the rest of the world.